What Costs Risks Arise in the Employment Appeal Tribunal, Including Wasted Costs Orders?

The Employment Appeal Tribunal has a discretionary power to award costs under Rule 34A of the Employment Appeal Tribunal Rules 1993. Costs may be ordered where a party has acted unreasonably in bringing or conducting proceedings, or where any proceedings have been unnecessary, improper, vexatious, or misconceived. The EAT also has a separate jurisdiction to make wasted costs orders against legal representatives under section 4 of the EAT Rules, where a representative's conduct has been improper, unreasonable, or negligent and has caused unnecessary costs to be incurred.

Costs orders in the Employment Appeal Tribunal remain the exception rather than the rule. The EAT recognises that the right of appeal exists for good reason and that an unsuccessful appeal is not, without more, unreasonable. However, the costs risk is real and should be factored into the decision to appeal or to resist an appeal. Pursuing an appeal that has no reasonable prospect of success, or conducting an appeal in a manner that is unreasonable, may lead to a costs order.

Legal Framework

Rule 34A: Costs Against Parties

Rule 34A of the EAT Rules provides that the Employment Appeal Tribunal may make an order requiring a party to pay costs to another party where the paying party has acted unreasonably in bringing or conducting the proceedings. The power extends to all proceedings in the EAT, including applications, interlocutory hearings, and the full hearing.

The threshold of unreasonableness is significant. The EAT applies the same general principles as the Employment Tribunal and the civil courts. An appeal that is brought in good faith but which fails is not ordinarily considered unreasonable. The costs risk arises where the appeal was hopeless from the outset, where the grounds do not disclose any arguable error of law, where the appellant's conduct caused unnecessary delay or expense, or where the appeal was pursued for an improper purpose.

The Employment Appeal Tribunal may also award costs where proceedings have been unnecessary, improper, vexatious, or misconceived. Misconceived proceedings are those that have no reasonable prospect of success. This ground overlaps with the unreasonableness threshold but provides an alternative basis for a costs order.

Wasted Costs Orders

The Employment Appeal Tribunal has jurisdiction to make wasted costs orders against legal representatives. A wasted costs order is directed at the representative, not the party, and requires the representative to pay costs that were incurred as a result of improper, unreasonable, or negligent conduct. The jurisdiction derives from section 4 of the EAT Rules and mirrors the wasted costs jurisdiction in the civil courts.

Wasted costs orders are rare but serious. They arise where a legal representative has pursued an appeal that no reasonable representative would have pursued, has failed to comply with directions causing unnecessary costs, or has otherwise conducted the proceedings in a manner that falls below the standard expected of a competent practitioner.

The procedure for a wasted costs application requires the applicant to identify the specific conduct complained of, the costs that were incurred as a result, and the basis on which the conduct is said to be improper, unreasonable, or negligent. The representative is entitled to a hearing before a wasted costs order is made.

Costs at the Rule 3(10) Stage

The costs risk at the Rule 3(10) stage arises principally where the respondent has been directed to attend. If the respondent attends and the application fails, the respondent may seek its costs of attending. Where the respondent was not directed to attend and did not attend, the costs exposure at the Rule 3(10) stage is limited.

However, even where the respondent does not attend the Rule 3(10) hearing, the unsuccessful appellant has incurred its own costs in preparing for and attending the hearing. These costs are irrecoverable and should be factored into the decision on whether to pursue the Rule 3(10) application.

Common Errors and Misconceptions

The most common misconception is that costs orders are routine in the Employment Appeal Tribunal. They are not. The EAT exercises its costs jurisdiction with restraint, and the vast majority of appeals do not result in costs orders. However, the risk exists and should not be disregarded.

Another error is to assume that because the Employment Tribunal rarely awards costs, the Employment Appeal Tribunal is similarly reluctant. While costs orders are the exception in both forums, the EAT is more willing to award costs where an appeal was plainly hopeless. The appellate context means that the grounds of appeal are a written record against which the reasonableness of the appeal can be assessed.

Some parties believe that a costs order can only be made if the appeal was brought in bad faith. This is incorrect. Bad faith is not required. The test is unreasonableness, which is an objective standard. An appeal that was brought in good faith but which no reasonable person would have brought may be considered unreasonable.

A further misconception is that the respondent must formally apply for costs at the outset of the proceedings. While early signposting is good practice, a costs application can be made at the conclusion of the hearing. The respondent should, however, put the appellant on notice that costs will be sought, to ensure fairness.

Legal representatives sometimes underestimate the risk of a wasted costs order. The jurisdiction is directed at the representative personally and can have significant professional and financial consequences. A representative who pursues an appeal that is plainly hopeless or who fails to comply with directions causing unnecessary costs may be personally liable.

Practical Application

The costs risk should be assessed before the appeal is lodged. Where specialist advice confirms that the appeal has no reasonable prospect of success, the costs risk is a further reason not to appeal. Where the appeal has reasonable prospects, the costs risk is minimal because an unsuccessful appeal that was reasonably brought will not ordinarily attract a costs order.

For respondents, the decision to pursue a costs application should be proportionate. A costs application involves additional time and expense, and the EAT's discretion means that success is not guaranteed even where the appeal was plainly without merit. The costs application should be reserved for clear cases where the appeal was obviously hopeless or the appellant's conduct was plainly unreasonable.

Where a costs application is to be made, the respondent should keep a record of the costs incurred and the conduct that is said to be unreasonable. A schedule of costs should be prepared in advance of the hearing so that it can be produced promptly if the appeal fails.

The Employment Appeal Tribunal may summarily assess costs (determining the amount at the hearing) or order a detailed assessment. Summary assessment is the more common approach and is appropriate where the costs are straightforward. Detailed assessment is reserved for complex cases or large amounts.

The quantum of costs that may be awarded is not capped, although the Employment Appeal Tribunal exercises its discretion in determining the appropriate amount. The EAT may limit the costs to a particular stage of the proceedings or a particular aspect of the conduct that was unreasonable. For example, where only part of the appeal was unreasonable, the EAT may limit the costs order to the costs attributable to that part.

Both parties should be aware that unreasonable conduct can arise at any stage of the proceedings, not only in the bringing of the appeal. Failure to comply with directions, failure to agree bundles, failure to attend hearings without good reason, and last-minute adjournment applications may all be considered unreasonable and may give rise to a costs liability.

Process and Timing

A costs application is typically made orally at the conclusion of the hearing, following the Employment Appeal Tribunal's judgment. The party seeking costs should be prepared to make the application immediately and should have a schedule of costs available. The respondent should signpost its intention to seek costs in the Respondent's Answer or skeleton argument.

Wasted costs applications follow a separate procedure. The applicant must give the representative notice of the application and the specific conduct complained of. The representative is entitled to a hearing and to make representations before a wasted costs order is made.

The Employment Appeal Tribunal may make a costs order on its own initiative, without an application from a party. This is uncommon but may occur where the EAT considers that a party's conduct was particularly unreasonable.

When to Seek Specialist Counsel

Understanding the costs regime in the Employment Appeal Tribunal is an important element of appellate strategy. A specialist can advise on the costs risk of bringing or defending an appeal, draft effective costs submissions where an application is to be made, and defend against a costs application where one is made. A specialist will also ensure that the appeal is conducted in a manner that minimises the costs risk.

For legal representatives advising on appeals, awareness of the wasted costs jurisdiction is essential. A representative who advises a client to pursue a hopeless appeal may face personal liability. Specialist advice on the merits before lodging the appeal is the most effective way to manage this risk.

Frequently Asked Questions